Facing the music

'Just fix PERS' not as easy as it sounds; state must keep promises to employees

When the subject of the state budget comes up, a familiar refrain is heard repeatedly: "Just fix PERS" — Oregon's historically generous public employee pension system — and everything will be fine.

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Posted Mar. 10, 2013 at 2:00 AM

Posted Mar. 10, 2013 at 2:00 AM

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When the subject of the state budget comes up, a familiar refrain is heard repeatedly: "Just fix PERS" — Oregon's historically generous public employee pension system — and everything will be fine.

If only it were that simple.

Lawmakers in Salem are beginning to work on the budget for the next two years, and everyone involved has proposed changes to the Public Employee Retirement System, from Gov. John Kitzhaber to the Democratic co-chairs of the budget-writing Ways and Means Committee to minority Republicans. The proposed reforms vary mostly in degree — how much to trim cost-of-living increases in payments to retirees, for instance — and everyone wants to put the projected savings into public school funding.

There is no question that strapped school districts would benefit from enough money to hire back teachers, add back instructional days and restore popular electives such as art and music classes. But lawmakers should not assume all their proposed PERS reforms will survive the inevitable court challenges from public employee unions.

The liabilities facing the PERS system today are the result of deals struck decades ago, coupled with the economic downturn of 2008 that left PERS $16 billion in the hole.

The Legislature accomplished significant reforms to PERS in1996 and in 2003, and public employees hired after those changes have a less generous retirement benefit. Going forward, the system has been "fixed."

But those reforms did not — and legally could not — alter the retirement benefits the state had committed to provide to public employees already on the job or already retired. Some of those hired before 1996 — the so-called "Tier 1" employees — are still on the job. Many others are retired but likely to collect their generous pension checks for years to come.

The problem facing lawmakers is less a political one than a legal one.

Certainly, the Legislature should do what it can to limit PERS costs. But it must do so without reneging on what the courts have said amounts to a binding contract between the state and public employees.

Backers of some proposed reforms insist they will pass muster with the courts. Union leaders insist just as confidently that the changes will be struck down.

We don't claim to know what will happen. We do know that whatever changes the Legislature enacts will be challenged by the unions. The Legislature can specify that legal challenges automatically go to the state Supreme Court, saving some time by bypassing the lower courts.

But simply passing reform bills doesn't mean all the savings will automatically follow.

At some point, Oregonians and their elected representatives have to accept the fact that promises made to public employees must be honored, painful though that may be.